Channel question eSys, Teledata funding

According to a press release issued by eSys, it has received a financial
injection of $100 million from Bangalore-based Indian software and services
company Teledata Informatics Ltd. The release further said that the 'strategic
investment' is designed to help eSys maintain its growth and provide it with a
war chest to fund acquisitions.

“We are pleased to close this investment, which will help us continue our
growth,” said Vikas Goel, Group Chairman and MD, eSys, who will also join the
board of directors at Teledata. “We see it as a strategic infusion which will
help eSys consolidate its position as the market leader in IT distribution and
strengthen its position as a leading PC maker.”

eSys claims that the investment will allow it to 'continue and consolidate
the growth' that has seen it develop into one of the largest components
wholesalers in the world since its inception six years ago. Rising in a meteoric
manner, during that time the company has bolstered revenues from $108 million to
$2 billion and now employs more than 1,100 staff across 30 countries.

Vikas Goel, Group Chairman and MD, eSys

When asked about the valuation process adopted by eSys before going in for
this investment by Teledata, the company's Singapore-based spokesperson
declined to comment.

It is interesting to note that the investment from Teledata comes less than
six weeks after eSys suffered the blow of losing Seagate from its vendor
portfolio. eSys was Seagate's biggest global partner, procuring more than
eight million hard drives a year from the company. eSys lost the prestigious
contract after a dispute over a sales audit. Close on the heel of this
development, eSys has been able to quickly move to bring its HDD offering backup
to full strength by extending a deal with Samsung.

This announcement of Teledata investment comes at a time when eSys is going
through a bad time. However, the channel community is questioning the manner in
which this investment announcement was made.

While the company claims that it has got this 'unusually big' investment
funding, experts in the market say that it is a result of mounting pressure from
different vendors associated with eSys. Sources close to the industry are also
questioning whether the deal is for real or not.

“The company has surely done this in order to save its name and reputation
in the international market. Most vendors who were earlier associating
themselves with the company have started to distance themselves. Esys management
thinks that by this move they might be able to stand a better chance of survival
in the highly contested global distribution realm. I still do not feel that this
is a real investment with real money involved,” added a New Delhi-based source
on condition of anonymity.

While some industry insiders believe that there is no real investment being
made at eSys and it is all being done in order to project a healthy image of the
company, others say that if there is any investment it has been made by Goel who
is Chairman and MD of the company.

“I don't think that there is any real money involved in this deal. This
is all Goel's money, which he has passed on to the company himself. This is
all being done in order to project a positive image for eSys globally,” added
another industry insider on condition of anonymity.

Restructuring at India?

At one end the company has lost big business opportunity in terms of Seagate and
has announced big injection of money, at the other end it is engaged itself in a
restructuring exercise in order to minimize the loss. As part of this
restructuring initiative, according to market sources the company is in the
process of making certain changes in its Indian operations and R Govindan, CEO,
eSys is likely to be shifted to the US operations, while Neeraj Chauhan, the
Singapore-based COO is likely to come to India to take charge here.

When contacted, eSys official spokesperson here in India neither declined nor
confirmed this development saying that all these matters were being decided
centrally from Singapore. After having been able to spread its wings globally in
a short span of time, today eSys distributes well-established brands including
Western Digital, Samsung and BenQ. The company also operates PC assembly plants
in four countries, including the UAE.